Proposed corn ethanol plant in Iowa awarded tax incentives

By Erin Voegele | February 19, 2016

A proposed corn ethanol plant that has been under development in southwest Iowa for nearly a decade may finally come to fruition. If constructed, it will be one of only a handful of first-generation ethanol plants to break ground since 2008.

On Jan. 29, the Iowa Economic Development Board announced it would provide tax incentives to a proposed 150 MMgy dry mill corn ethanol plant under development by Farmers Energy Cardinal LLC in Cass County, Iowa, northwest of Atlantic.  

The project has been under development for nearly a decade. According to information provided by the IEDB, efforts to develop the ethanol plant first began in 2006 when a group of farmer investors formed Amazing Energy Atlantic LLC. They invested millions of dollars in site preparation, concrete piers and an office building. However, the group was unable to complete fundraising for the project, and left the site mid-construction. Ron Fagen bought the site in early 2012.

Information released by the IEDB states Farmers Energy Cardinal was founded in Ohio in 2006 as a collaboration of investors led by Ron Fagen, the founder of Fagen Inc. and Fagen Engineering. Fagen, which has constructed 60 percent of U.S. ethanol production capacity, will design and build the facility for FEC.

The IEDB awarded the project a sales tax refund to create 49 jobs, of which 45 of incented at a qualifying wage of $18.87. The project is expected to result in a capital investment of $189.9 million. The contract is contingent upon the project securing financing, which is required within one year of the day of approval. Construction is currently expected to begin in the fall of 2017.

According to information included a document providing an overview of the award, Pro Exporter Network, a firm in grain origination studies and analysis, completed a corn origination study for the project and has concluded that there is sufficient corn available in the area to support the proposed plant without reducing the amount of corn needed by other ethanol plants. In addition, as corn production yields continue to increase with new genetics and varieties, the size of consumptive draw areas will shrink.

The U.S. EPA approved a fuel pathway for the proposed plant in January 2015. Information filed with the U.S. Securities and Exchange Commission indicates the project was under the ownership of Rex American Resources Inc. at that time. Rex American Resources listed the Farmers Energy Cardinal Holding LLC and Farmers Energy Cardinal LCC as subsidiaries in SEC filings made in April 2012, April 2013, April 2014 and March 2015. That, however, is no longer the case. According to a spokeswoman with the IEDB, ownership of the project is believed to have been reverted to Fagen. 

According to information published by the EPA, Farmers Energy Cardinal submitted an efficient producer petition to the agency in October 2014. EPA analysis found that corn ethanol produced at the proposed plant would achieve a 22.2 percent reduction in life cycle greenhouse gases when compared to baseline gasoline.

The IEDB spokeswoman added that the board believes the location of this project is one of the only areas left in Iowa that could support the development of a corn ethanol plant. There was a great deal of local support for the project, she added, noting that the board felt the modest award of the tax benefits was appropriate based on the project and the jobs it will ultimately create. There was an additional request for investment tax credits for the project, which would have had an additional value of $13 million, but that award was not made.

According to the Iowa Renewable Fuels Association, the state currently features 42 ethanol plants with a combined 3.9 billion gallons of capacity, including 22 million gallons of cellulosic capacity. If built, the Farmers Energy New Cardinal project could increase the number of plants to 43 and push nameplate capacity above 4 billion gallons per year.